Helps to understand 5 forces that determine the competitive intensity and attractiveness of the market. Attractiveness relates to industry profitability. An industry that would be unattractive would have a combination of forces that drive down overall profitability.

This is a qualitative evaluation of the firm’s strategic position.

3 forces from horizontal competition
-Threat of substitute products
-threat of established rivals
-threat of new entrants

2 forces from vertical competition
-the bargaining power of suppliers
-the bargaining power of customers

This model is meant to be used at an industry level not for a industry group or sector.

Read more about Porter five forces analysis on wikipedia

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